Help clients through bubble markets

By Richard Deaves as told to Brynna Leslie | March 4, 2013 | Last updated on March 4, 2013
1 min read

Bubble markets occur when stocks trade at inflated prices.

And everyone has the potential to get caught up in a bubble. If I’m a DIY investor who sees rising prices in a particular market, I may start to trade more frequently.

So the best way to help clients through bubbles is to calm them down when they get excited.

Help them understand they can’t control what others are doing, or what’s happening in markets—they can only control their own behaviours.

Show them market trends over the last 100 years. While there have been bull markets, these have generally been followed by long stretches of bear markets. Providing solid evidence of market trends will help keep clients’ emotions in check.

And while your clients should periodically check their portfolios, excessive attention to market movements is not helpful and will create added stress. Instead, tell people to file their statements, unopened if necessary.

This decreases the chances of clients becoming overly optimistic when they see the value of assets going up (or overly depressed when they see them going down).

Click to enlarge The bubble year Read more: When bubbles burst, clients suffer >

Richard Deaves as told to Brynna Leslie